Which of the following is an assertion of the Heckscher-Ohlin model?
A) The wage-rental ratio is determined by relative product prices.
B) An increase in a country's labor supply will increase production of both the capital-intensive and the labor-intensive good.
C) In the long-run, labor is mobile and capital is not.
D) Factor price equalization will occur only if there is costless mobility of all factors across borders.
E) Factor endowments determine the technology that is available to a country, which determines the good in which the country will have a comparative advantage.
A
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An economic model should capture
A) the essential relationships that help to analyze the problem. B) all possible variables that apply to the problem. C) only social value related variables. D) all of the above.
Assume an industry, currently dominated by one firm, experiences a large decline in fixed costs. This will
A) make entry of other firms more likely. B) make entry of other firms less likely. C) serve as higher barrier to entry. D) induce the incumbent firm to exit the industry.